01.01.2026, New Delhi: Union Finance Minister Nirmala Sitharaman has announced important changes to the Income Tax Act. The new rules will come into effect from April 1, 2026.
Presenting the Union Budget for the financial year 2026–27 in the Lok Sabha, the Finance Minister said the updated tax system will make it easier for common people to file their tax returns. She added that simplified tax forms will be introduced soon.
Extended Deadline for Revised Returns
The government has extended the last date for filing revised tax returns. Earlier, the deadline was December 31. Now, taxpayers can file revised returns until March 31.
This gives people extra time to correct mistakes in their tax filings.
Tax Relief on Travel, Education and Medical Expenses
The Finance Minister announced tax relief in several areas to help citizens reduce expenses.
- Lower tax on foreign travel
- TDS on foreign education reduced from 5% to 2%
- TDS on medical treatment abroad reduced from 5% to 2%
This move will benefit students and families spending money on education and healthcare outside India.
Changes in TDS for Agencies
TDS for human resource supply agencies has also been reduced. These agencies will now pay only 1% or 2% TDS.
Additionally, the government has removed tax on interest earned from road accident compensation, providing relief to victims.
A special scheme will also be introduced for people who pay small amounts of tax.
Foreign Asset Disclosure Mandatory
Nirmala Sitharaman clearly stated that taxpayers must now disclose details of all foreign assets. Reporting overseas properties, accounts, or investments is now compulsory.
New Tax on Share Buybacks
The Finance Minister also announced new taxes related to share buybacks.
- 2% tax on corporate share buybacks
- 30% tax on non-corporate buybacks
This step aims to improve tax collection and ensure fairness.
Reduced Criminal Penalties in Tax Disputes
The government has also reduced strict punishments in tax-related disputes. The maximum jail term has been reduced to two years.
In some cases, the jail sentence can be avoided if the person pays a fine.
With these changes, the government aims to make the tax system simpler and more taxpayer-friendly. The new Income Tax Act is expected to reduce the burden on citizens while improving transparency and compliance.
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